This article was originally published in the Beauty Communities Trend Report. Receive your copy here
As a way to foster engagement, deepen customer relationships, build loyalty, increase conversions and ultimately drive growth, brand communities can be one of the most powerful tools in a company’s marketing toolkit.
And in beauty, brands are either rushing to set up their community strategy, or building and nurturing their existing brand communities, as they realise how critical they are in meeting consumers’ current needs, and ultimately, the role they can play in their success.
This is because brands are now understanding that, in the vast majority of cases, it is a minority of their customers that generate a majority of the value.
Quentin Lebeau, CEO of TokyWoky, a community platform that works with brands including L'Oréal to grow their brand communities, says: “When brands dig into their numbers they often find that their top 20% of customers generate 30% to 50% of their revenue, over 80% of their user generated content (UGC) and over 80% of their advocacy (posts on social).
“This means that identifying, engaging and leveraging that minority will allow a brand to secure a large part of its future revenue, maximise UGC creation and scale its organic growth,” he explains.
“With the current state of the economy and the skyrocketing prices of digital ads, this initiative becomes more and more important with each passing day.”
Emma Poole, Assistant Brand Manager of The Red Tree agrees that community-led approaches have become increasingly important within the beauty industry, and says that this is also in response to a shift in the consumer landscape.
“Mass marketing strategies are losing their effectiveness as consumers seek more authentic and relatable experiences. People are motivated by forming bonds with like-minded individuals, creating meaningful connections and wanting to engage with brands that align with their values and aspirations.”
Likewise, consumers are losing trust in influencers and ‘influencer fatigue’ has set in.
Data from market research company GWI found that Gen Z’s engagement with influencers has fallen by 12% since 2020.
This is also accelerating the growth of community-led UGC in beauty. According to Adweek, UGC is now ten times more influential in the purchase decision than influencer or branded marketing, while 85% of shoppers trust UGC over any branded or influencer content (TokyWoky).
Brands, especially in beauty, are finding it to be a powerful tool to open up conversations between themselves and their consumers, helping to build and grow an engaged community.
This adds to the wide range of approaches that are being used by brands and retailers to leverage and build their communities throughout digital and IRL.
In this report, Cosmetics Business explores the key trends that are ultimately changing the way that consumers can connect with beauty brands, and their products.
Trends will be revealed in detail throughout July exclusively to subscribers, so don't miss out and subscribe.
Trend 1: IRL events
An explosion of immersive pop-ups and IRL events became one of the most remarkable trends in beauty retail in 2022, but many brands have overlooked the opportunity to use them specifically for community building – until now.
“I think we’re going to see a lot of innovation in community engagement from an experiential point of view over the next 12 months,” says James Barnes, founder and Business Director of experiential marketing agency Backlash.
“Community is starting to work its way onto the objectives list for the first time, for brands looking to do pop-ups and other IRL events,” says Barnes. “It’s normally footfall and sales, but now we’re seeing footfall, sales and community,” he explains.
This trend explores some of the brands that are using IRL events to both reward their dedicated community members and build even more loyalty.
Trend 2: Community commerce
Out of an era of influencer fatigue and growing distrust around sponsored influencer content, a new breed of community-powered beauty shopping sites has emerged, aiming to bring a new era of authenticity to e-commerce.
Consumer-powered beauty shopping sites including Flip.shop, Supergreat, Trendio and Sourcerie may all work in slightly different ways, but what they are collectively bringing to the retail landscape is a new form of peer-recommended, review-based experience that are carving out a next-level solution to the way that people want to buy beauty today.
Given that 93% of consumers say that reading online reviews affects their purchasing decisions, and that 64% of British consumers have lost respect for influencers that are driven by commercial gain, experts believe they are on to something.
Trend 3: Turning NFTs and virtual worlds into loyalty programmes
What makes NFT campaigns successful? Early experiments have seen brands venture into the space with ‘one and done’ drops, enabling consumers to buy and resell branded assets.
However this strategy misses the bigger opportunity.
Alex Manning, Head of Strategy at creative agency Cult, says: “I think we all saw the crypto boom, and the way brands leapt on that in quite a manic phase where lots of money was changing hands and brands were starting to see NFTs as essentially a speculation vehicle.
“But this doesn’t really reward the brand loyalists – the people that it’s designed for who would most desire to have that item.”
Beauty brands are now starting to move into a new phase where they are looking at ways to build an active and engaged community within the NFT space that people will continue to want to be a part of.
Trend 4: Product co-creation
If there’s one statistic that consumer brands are achingly familiar with, it’s this: around 80% of new product launches fail.
It's an issue that the more wily beauty companies are addressing with the help of their brand communities.
By involving their most engaged customers in their next product launches, brands are finding that they can bring products to market that are truly needed and wanted, increasing NPD success, while reducing waste.
The way that beauty brands are incorporating this into their strategies ranges widely: from a product idea suggested by the brand community, to feedback on textures and scents, packaging designs and product names, through to full-scale product co-creation.
And the trend is set to disrupt traditional NPD cycles for more brands in beauty.
Trend 5: 3 killer brand communities
The beauty industry has some of the best examples of successful brand communities.
The most exceptional offer a brand experience that consumers are queuing up to get involved with.
Sephora is frequently cited as one of the strongest examples with its loyalty-based Beauty Insider programme counting over 25 million members, who are responsible for 80% of the company’s sales.
“Sephora had the vision to invest the right level of resources into developing their community years before the rest of the market followed,” says TokyWoky's Lebeau.
But which other players have built stand-out 'beauty fandoms'? In this article, Cosmetics Business exclusively interviews three that are leading the way.
- Read here: 3 killer brand communities in beauty
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